Legislators argue impact of tax exemptions

Local legislators question some of Gov. Jay Nixon’s figures on last-minute tax exemptions and the effect of those exemptions on local governments, including schools.

On the General Assembly’s last day this year – Friday, May 16, after the state’s fiscal year 2015 budget had been passed – legislators passed bills exempting several items from sales taxes. Nixon has called those “special-interest giveaways” that put the state budget in the red, and he has strongly suggested he’ll veto a dozen such bills.

But several local legislators at a recent update – one Republican, three Democrats – took issue with the Democratic governor’s assertions. Several of the exemptions are addressing long-standing concerns, they said.

The exemptions cover a range of issues. One would help data centers, which local officials have wanted for some time. Others include marine fuel, amusement park admission, farmers markets, commercial laundries and even a tax holiday for graphing calculators. One, Torpey said, is directly responsible for 600 area manufacturing jobs. A company near Kansas City International Airport takes advantage of an exemption for aircraft replacement parts, and the extension of that tax exemption approved by legislators will mean another 1,000 jobs, Torpey said.

“It’s a big deal,” he said.

The governor’s office – which has used the phrase #FridayFavors on Twitter – says the bills add up to $421.5 million in lost state revenues and $351.4 million to local governments, including $5.01 million for Independence, $1.86 million for Blue Springs and $221,000 for Grain Valley.

“If he doesn’t take action on this, it’s going to be devastating,” said Rep. Tom McDonald, D-Raytown, who said Nixon should veto all the bills.

Independence School District Superintendent Dale Herl pointed out that schools get sales tax money under Proposition C “rollback” funds and the estimated cost to Independence was $1.5 million.

“A lot of people don’t realize the impact that will have on school districts,” Herl told legislators at the briefing, hosted by the Independence Chamber of Commerce.

But state Sen. Paul LeVota, D-Independence, said some of those exemptions shouldn’t apply to schools.

“So I really dispute how much local impact there is,” he said.

Independence City Manager Robert Heacock said the potential $5 million loss is a large concern but also said the city needs to look more closely at the governor’s numbers.

“The continuing erosion of our sales tax is a concern,” he said.

Torpey pointed out that the governor’s criticism of the tax bills comes after Republicans a few weeks earlier put together enough votes to override Nixon’s veto of a cut in state income taxes. He said the governor is still upset about that.

“That’s what this comes down to,” Torpey said.

Torpey and the three Democrats did disagree sharply on the effects of the income tax cut. LeVota said it will hurt state revenues – $600 million or more out of the state’s roughly $8 billion in general revenues, critics say – while disproportionately benefiting the wealthy.

Torpey strongly disagreed, pointing out that state revenues have to rise a certain level before the cut would be phased in as early as 2017. He said this year’s bill is shorter and simpler than the one Nixon successfully vetoed last year.

“This is a much simpler bill,” Torpey said. “We overrode it. We’ll see what happens. It’s not going to be the end of the world.”